Please show schools a little private charity

22nd November 2002 at 00:00
The proposals for reform of charity law made by the Cabinet Office's strategy unit in a recently published consultation document are not as benign as some would have us believe. If implemented, they could force many independent schools to close and spell heartbreak for thousands of middle-income families who already struggle to pay fees to give their children a good education.

At the root of the problem is the Government's plan to change the legal definition of "public benefit". According to the current law, a charity is a body which either advances education or religion, relieves poverty or promotes another purpose which has been recognised by the courts as being beneficial to the community and to the wider public.

The concept of public benefit as a prerequisite for charity has evolved over more than 400 years. There must be a benefit to the community or a sufficiently large section of the community. In the case of education, it is presumed that there is a benefit to the public. The courts have always accepted that educating a child is of benefit to the public - the alternative is an illiterate society. No distinction is made between free education and fee-paying schools.

Until now, charity law has been developed by the courts without any political influence. This is about to change. The Government, actively encouraged by some within the charitable sector, proposes that the presumption of public benefit should be scrapped and that charities that charge fees - the level of which "serve to exclude large sections of the public" - be required to prove that they are providing a public benefit.

Independent schools get a specific mention. Worse, it is proposed that the Charity Commission - the regulatory body which already struggles to fulfil its existing functions with limited resources and a high staff turnover - should decide whether independent schools are providing a direct public benefit. In effect, therefore, the civil servants of an un-elected body will be making the law. An independent school which fails the Charity Commission's test could lose its charitable status and therefore its tax reliefs on income and gains, which are currently exempt if used for the purposes of the school.

We are told that there will be no real change of the current position and that most schools will probably pass the public benefit test through providing scholarships for needy bright children, or by making their sports facilities available to the general public. Yet a charity established to provide education could be breaching the law if it allowed its property to be used for non-educational purposes, such as hiring out the sports hall for an antiques fair to raise money for the school.

The consultation paper proposes that the Charity Commission should issue guidance on the level of fees that might trigger further enquiry. This is far too subjective to make good law. What is wrong with the existing test of "public benefit" anyway?

There are considerable advantages to the public of independent schooling. Taxpayers contribute through their taxes to the state-school system but parents who send their children to independent schools save the state the expense of educating their child. Independent schools do not pay tax on fees used for the school's charitable purposes. However, most parents have paid tax on their gross income which is used to pay the fees. If independent schools had to pay tax on fees, parents would, in effect, be paying tax twice and the cost of education would rise.

In many cases this could lead to schools closing, especially those attended by children whose parents struggle to pay the fees and which can neither afford to provide scholarships nor boast facilities suitable for community use. To put the matter in perspective, a colleague of mine with children at an independent school was asked to contribute financially to stop the school from closing because of insolvency.

No doubt, well-endowed independents such as Eton, or the Bedford schools, will continue to flourish. But for the smaller independents, this unjustified assault on charity law could mean closure.

I do wish politics would stay out of charity.

Moira Protani is a partner at Berwin Leighton Paisner and specialises in charity law

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